Economic Reforms Are Working in Indiana

What’s made Indiana’s economy one of the best in the country? According to a new study, it’s the pro-growth fiscal and labor reforms that state lawmakers secured in recent years—and it’s exactly why they should keep working hard to make Indiana’s economy even stronger.

That’s the conclusion from a new report by the American Legislative Exchange Council (ALEC). In its annual ranking of state economic competitiveness, Indiana currently ranks sixth. That’s a marked increase from just four years ago when we ranked 24th.

What’s led to this rise? Perhaps the biggest driver of this success came in 2012, when Indiana became the 23rd right-to-work state. For the first time in generations, Hoosier workers were given the freedom to choose whether they join or pay fees to labor unions.

The benefits of right-to-work have been the same in Indiana as they’ve been all across the country. Since 2012, our unemployment rate has dropped by nearly half—from 8.6 percent to 4.6 percent in January of this year. We’ve also added 157,000 workers to our labor force, and seen some of the strongest economic growth in years. While not all of that owes exclusively to right-to-work, the reform surely makes a difference.

But right-to-work legislation was just the beginning. State lawmakers enacted a number of pro-growth tax reforms that put more money back into our pockets.

In 2013 we got a cut in our personal income tax rate, which will reduce our taxes by a full 5 percent once it’s fully implemented in 2017. At the same time, lawmakers also eliminated the death tax, meaning families no longer have to pay taxes on inheritance from our loved ones.

Lawmakers have also passed a number of tax reforms aimed at improving Indiana’s business climate. This was long overdue and badly needed. Back in 2010, new businesses struggled to keep their doors open. Of the 7,694 businesses created that year, nearly a third of them had failed by 2012.

That began to change in 2011, when state lawmakers passed the first in a series of corporate tax reforms. The first step was to reduce the rate from 8.5 percent—one of the highest in the country—to 6.5 percent. New Hoosier businesses began improving quickly. Of the 9,016 businesses that opened in 2013, nearly 80 percent of them survived through the end of 2014. Considering that 33 percent of businesses typically fail within their first two years, that’s a big win for Indiana.

State lawmakers continued these reforms in 2014, signing into law a corporate income tax rate cut from 6.5 percent down to 4.9 percent by 2021, making it the second lowest in the nation. The results? By the end of 2014, 285 companies pledged to invest $4.38 billion in Indiana.

While all of this success is certainly cause for celebration, now is no time to rest on our laurels. While we ranked sixth nationally on ALEC’s report this year, that’s actually down a few spots since 2014, thanks to other states responding with competitive reforms of their own.

That’s all the more reason for state lawmakers to continue enacting pro-growth reforms that improve our economy and the well-being of Hoosier families. We’ll be working alongside them with our “Indiana on Track” initiative showing the success of these reforms and their benefits to people’s lives. It’s clearly working in Indiana—now is the time to keep doing even more.

Justin Stevens is the Indiana state director of Americans for Prosperity Foundation.